Thank you, Phil, and thanks for having me back to address this conference for my fifth year. You always do a great job of identifying key issues and lining up a broad array of experts to discuss them. This is an important conference and I hope it continues for many more years.

Today I want to talk about the challenges we face to maintain a free and open Internet in the wake of the unauthorized disclosures of United States government surveillance practices. President Obama addressed the national intelligence ramifications of these practices on January 17 and I will not talk about those today.

What I do want to talk about is the damage trust in government, and, by extension, U.S. companies in the wake of those disclosures. U.S. businesses report rising concern about the economic impact from this trust gap, and the threat to the free and open Internet and the multistakeholder model of Internet governance that has served so well.

Let me say at the outset that the events of the past several months have not altered the Administration’s support for a free and open Internet. Global trade relies on the continued open flow of data. Cutting off or disrupting these flows would cause significant economic damage and could impede technological advancement and innovation, which rely on global cooperation. We cannot let the surveillance issues jeopardize this. Too much is at stake. However, we have work to do to rebuild the trust of consumers worldwide in the Internet and in American companies that offer important and beneficial services over the Internet. We have work to do to discourage the building of barriers on the Internet to disrupt the free flow of information. And we have work to do to reduce and eliminate the threat to the existing multistakeholder process of Internet governance.

Let me talk about these challenges and what we are doing to meet them, particularly at the Department of Commerce and the National Telecommunications and Information Administration (NTIA).

To address the impact on U.S. businesses and the global internet, we continue to focus on the protection of consumer privacy. One of the strongest reactions to the unauthorized disclosures came from foreign governments and consumers. The President addressed this concern directly in his policy directive, which states that “all persons should be treated with dignity and respect, regardless of their nationality or wherever they might reside.”[1] As he stated in his speech, “Citizens in other countries [need to] have confidence that the United States respects their privacy too.”[2]

We have a particular focus in Europe, which is the biggest foreign revenue source for U.S. online companies. The U.S.–European Union (EU) Safe Harbor framework governs information flows between Europe and the U.S. Governments and consumers in Europe have expressed strong concerns that the U.S. does not protect their data as well as we protect data of U.S. users. Members of the European Parliament have called for the suspension of Safe Harbor. Late last year, the EU issued a series of recommendations to the U.S. to improve the framework.

Our colleagues in the International Trade Administration, along with the Federal Trade Commission (FTC), are working with the European Commission to negotiate these recommendations. The first sessions went well last month and discussions will resume this week. Recently, the FTC announced a number of important enforcement actions against companies who were not complying with their Safe Harbor obligations, thus demonstrating the continuing commitment of the U.S. to take seriously the privacy interests of European citizens.

Following the White House review of the national security disclosures, the Administration is turning to the broader issue of how changes in technology are challenging conceptions of privacy. In his speech, the President asked John Podesta to lead a comprehensive review of big data and privacy and how big data will affect the way we live and work.[3]

An explosion in information has accompanied the growth of the digital economy and the Internet. As John Podesta stated in a blog post, “We are undergoing a revolution in the way that information about our purchases, our conversations, our social networks, our movements, and even our physical identities are collected, stored, analyzed and used.”[4] When we talk about big data, we must address both the exponential increase in collection capabilities, including the expansion of sensing devices, as well as significant advancements in computing power and analytic capabilities that allow us to discover unanticipated facts from a variety of data sources.

The work effort, set to take ninety days, will culminate in a report articulating key questions in this space and identifying where further research and action may be required. The President’s Council of Advisors on Science and Technology will conduct its own study to explore the technological dimensions of the intersection of big data and privacy, which will feed into this broader effort.

In addition to this work, NTIA continues to implement the Consumer Privacy Bill of Rights. This past week, NTIA launched a new effort to bring together industry, academics, consumer groups and others to tackle the privacy challenges posed by commercial uses of facial recognition technology. Facial recognition technology is being embedded into social networking services, kiosks in stores and access systems. Online services are using facial recognition software to help consumers organize their personal photos and video games are using face prints to customize the gaming experience.

But the innovative uses of this new technology raise novel privacy questions such as how to ensure consumers are given sufficient notice that their biometric data are being collected and stored and how to provide consumers with appropriate control over their data? Through this multistakeholder process, we hope the parties will come together to develop a voluntary code of conduct to give consumers trust in this new technology. Our latest effort follows an important milestone we reached in July when stakeholders agreed to begin testing and implementing the first code of conduct focused on mobile app transparency.[5]

Let me turn to a second concern -- the building of barriers to disrupt the free flow of information. Some governments reacted to the unauthorized disclosures by increasing their attempts to control or regulate the Internet within their borders or by requiring that companies store data or locate hardware within their countries. Erecting such barriers is reactionary and shortsighted. Such actions threaten to fragment the global Internet and to disrupt the economic growth that flows from an open Internet. Eric Schmidt of Google has opined that the balkanization of the Internet “would be a very bad thing” and that “it would really break the way the Internet works.”[6]

A recent study by the Boston Consulting Group posits the concept of e-friction, which is a set of 55 factors that inhibit online interactions and exchange.[7] Sources of e-friction include the level and quality of broadband access, the level of digital literacy, and the availability of capital. The list also includes national policies toward openness and free flow of information. The conclusion of the analysis is that the digital economy accounts for a larger share of overall economic activity in low-friction countries than it does in high-friction countries.

A separate report on localization barriers to trade by the Information Technology and Innovation Foundation[8] goes deeper and finds that localization barriers can damage the countries that use them by raising the cost of key capital goods and by isolating countries from participation in the global economy. Perhaps the growing recognition that such economically inefficient policies will harm the countries that adopt them will quell some of the initial enthusiasm countries showed for implementing these barriers. But we must work together to ensure that all countries understand the threats of such measures and to oppose them where we can.

Next let me address the renewed global challenges to Internet governance, and specifically the multistakeholder model of Internet policymaking. I have spoken about the multistakeholder process every year I have been here at Silicon Flatirons so I will not spend much reviewing the concept today. Basically, the multistakeholder model allows all interested parties, such as industry, civil society, government and technical experts, to participate as equals to solve policy issues. By encouraging the participation of all interested parties, multistakeholder processes can encourage broader and more creative problem solving.

For years, there has been a debate as to whether governments should control Internet decision making instead of multistakeholder bodies. This debate came to the fore at the World Conference on International Telecommunications (WCIT) in Dubai at the end of 2012. As I told this conference a year ago, our experience at the WCIT showed us that we have an ongoing challenge to convince countries of the benefits of the multistakeholder process. We need to focus on those nations, largely in the developing world, that want the benefits of the Internet to grow their economies and create wealth for their citizens. They have issues such as how to maintain sustainable investment in their infrastructures and are legitimately concerned about the online problems of spam, child pornography and the like. Many would be open to solving these problems through means such as a multistakeholder process but they are just not comfortable enough with this form of governance to join in.

This year could be a watershed year for the multistakeholder model of Internet policymaking. Last year, the leaders of the Internet technical community – the I Stars – came together to spearhead an international campaign to craft Internet governance principles and to propose a roadmap for the further evolution of Internet governance.

In December, a High Level Panel on Global Internet Governance, chaired by the President of Estonia, and including members from around the world, convened in London to study these issues and provide thoughts on the evolution of Internet governance. The group will be issuing a draft report in early March, which then leads into a meeting the Brazilian government is hosting in April, which it is calling the Global Multistakeholder Meeting on the Future of Internet Governance.

Later in the year, Minister Ed Vaizey of the United Kingdom will host a high-level ministerial meeting in connection with the ICANN meeting in London at which these issues will be discussed. Then, in late summer, the Internet Governance Forum in Istanbul, Turkey will provide an additional opportunity for global discussions.

I am somewhat hopeful that these developments will ultimately reinforce support for the multistakeholder model and contribute to its positive evolution. For example, if after the WCIT you had told me that by February 2014, Brazil would be demonstrating global leadership to protect and expand the multistakeholder model of Internet governance, I would have been somewhat incredulous but very happy. We should not be too surprised, since Brazil has a strong tradition of multistakeholder Internet policymaking within its borders. Notwithstanding the concerns Brazil has raised about the surveillance disclosures, it has invited the U.S. to be a member of the high-level coordinating committee for the conference. The U.S. accepted that invitation and Ambassador Danny Sepulveda will represent the U.S. on that committee. We are impressed with the open and inclusive process Brazil has instituted to plan for this meeting. As Ambassador Sepulveda said in a recent speech, “the meeting holds promise in advancing the global community’s understanding of Internet governance if:

The agenda is developed in a truly multistakeholder fashion;

Participation at the meeting is broad and inclusive; and

Any follow-on activity is guided by, and ultimately supportive of, the multistakeholder system rather than intergovernmental mechanism of centrally imposed regulation or mandates.”[9]

It is encouraging to see a broad coalition of Internet stakeholders address these challenges in the spirit and tradition of the multistakeholder process. We appreciate the leadership being shown by Brazil and hope their involvement attracts the engagement of many other countries in the developing world. We want to work collectively to make multistakeholder governance more inclusive while maintaining the stability of the open and innovative Internet.

In all of these activities, the Department of Commerce, and especially NTIA, will be directly engaged. As Commerce Secretary Penny Pritzker told the State of the Net conference in January, the Commerce Department “will serve as the chief federal champion for good Internet policy that supports America’s entrepreneurs, businesses, workers, and … consumers.”[10] On all of these issues, we need your partnership and your input to ensure that our policies are well thought out and nimble enough to response to this quickly evolving environment.